Hotel Employees Local 57 v. Sage Hospitality

• Decision Date: 15 November 2004
• Docket Number: No. 03-4168.,03-4168.
• Citation: 390 F.3d 206
• Parties: HOTEL EMPLOYEES & RESTAURANT EMPLOYEES UNION, LOCAL 57 v. SAGE HOSPITALITY RESOURCES, LLC, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

390 F.3d 206

HOTEL EMPLOYEES & RESTAURANT EMPLOYEES UNION, LOCAL 57 v. SAGE HOSPITALITY RESOURCES, LLC, Appellant.

No. 03-4168.

United States Court of Appeals, Third Circuit.

Argued May 12, 2004.

Filed November 15, 2004.

John M. O'Donnell, (Argued), Littler & Mendelson, Pittsburgh, PA, for Appellant.

Terry K. Leckman, Lipsitz, Nassau & Schwartz, Pittsburgh, PA, Arlus J. Stephens, (Argued), Davis, Cowell & Bowe, Washington, D.C., for Appellee.

Before NYGAARD, McKEE, and CHERTOFF, Circuit Judges.

CHERTOFF, Circuit Judge.

In this case, we examine whether federal labor law preempts the City of Pittsburgh's decision to condition a grant of tax increment financing upon the recipient's acceptance of a labor neutrality agreement. We must address how labor law preemption analysis applies when local government seeks to affect labor relations on a publicly financed development project. For the reasons stated below, we hold that the City is not preempted from requiring parties receiving tax increment financing to sign a labor neutrality agreement.

I

In early 1998, Sage Hospitality Resources, LLC ("Sage") began development of a hotel construction project in Pittsburgh, Pennsylvania (the "City"). As part of its financing strategy, Sage approached the Urban Redevelopment Authority of Pittsburgh ("URA")¹ for tax increment financing ("TIF") to support the construction of the hotel.

Authorized under Pennsylvania's Tax Increment Financing Act, 53 Pa. Cons.Stat. § 6930.1 et seq., TIFs were created to "provide an alternative method for use by authorities in pursuing redevelopment efforts under the Urban Redevelopment Law[, 35 id. § 1701 et seq.]." 53 id. § 6930.2(a)(3). In a traditional TIF scheme, a locality issues tax increment bonds to finance the redevelopment of a chosen district. These bonds are secured by tax revenues generated from the expected increase in property values-i.e., the tax increment-in the district. See generally Frank S. London, Note, The Use of Tax Increment Financing to Attract Private Investment and Generate Redevelopment in Virginia, 20 Va. Tax Rev. 777, 780-81 (2001). That is, TIF pledges future increases in tax revenues generated by a project to finance certain eligible costs for the project.²

The URA approved the creation of the Fulton Building TIF District and issued the TIF bonds. Sage was apportioned $3.56 million in TIF support for the hotel development project. The plan provided that some sixty percent of revenues from the tax increment would go toward the repayment of the TIF notes. The remaining forty percent of the revenue from the tax increment would be provided to the three taxing bodies, the City, the School District, and Allegheny County.

On February 2, 1999, following the approval of the TIF funds, the City passed Resolution 45, which required Sage, inter alia, to "enter into a post-construction certified labor agreement with a bonified [sic] labor organization recognized by the National Labor Relations Board." (App. 60 (emphasis omitted).) Approximately five months later, on July 27, 1999, the City passed Ordinance 22 to supplement Chapter 161 under Title One, Article VII of the Pittsburgh Code.³ The Ordinance added section 161.30, "Requiring Contractors and Employers of employees hired to staff hospitality operations to be signatory to collective bargaining agreements where the City of Pittsburgh has a financial or proprietary interest." (App. 47 (emphasis omitted).)

This section provides, in pertinent part:

Each and every Contractor and Employer of employees hired to staff hospitality operations shall be or become signatory to valid collective bargaining agreements or other contracts under 29 U.S.C. Section 185 with any labor organization seeking to represent Hospitality Workers employed in the Contractor's and/or Employer's Hospitality Operations in a Capital Project as a condition precedent to its contract with the City of Pittsburgh. Each collective bargaining agreement or contract must contain a provision prohibiting the labor organization and its members, and in the case of a collective bargaining agreement, all employees covered by the agreement, from engaging from any picketing, work stoppages, boycotts or any other economic interference with the Hospitality Operations of Contractor or any persons under contract to it for the duration of the time required for the repayment of public indebtedness incurred to finance the acquisition or development of such Capital Project, or for the duration of Contractor's contract or contracts with the City for the operation of such Capital Project, whichever period of time is more extensive (the "No-Strike Pledge"). Each agreement must provide that during this time period, all disputes relating to employment conditions or the negotiation thereof shall be submitted to final and binding arbitration. Each and every Contractor and Employer of employees hired to staff Hospitality Operations shall require that any work under its contract or contracts with the City to be done by the Contractor's or Employer's contractors, subcontractors, tenants or subtenants shall be done under collective bargaining agreements or other contracts under 29 U.S.C. Section 185 containing the same provisions as specified above.

(App.48.)

By February 2001, construction of the hotel had been completed, but Sage had not yet entered into a labor agreement with any labor union. On February 13, 2001, the City passed a resolution dissolving the Fulton Building TIF District and withdrawing the issuance of the $3.56 million TIF funds because Sage had not entered into a labor agreement under Resolution 45 and Ordinance 22.

One week after the passage of the resolution, Sage signed a Labor and Neutrality Agreement (the "Neutrality Agreement" or the "Agreement") with the Hotel Employees and Restaurant Employees Union Local 57, AFL-CIO ("HERE"). The Neutrality Agreement contained, inter alia, a no-picketing promise and a provision that union representation would be determined using a card-check procedure. The Agreement provided that disputes arising under it would be settled by arbitration. Following the Agreement, the Mayor vetoed the City Council's February 13 repeal of the Fulton Building TIF District, and Sage received funding.

Following the opening of the hotel on March 16, 2001, HERE asked that Sage hold a "card count" to obtain recognition of its union pursuant to the terms of the Neutrality Agreement. On June 19, 2001, the City concluded "that a majority of employees [at the hotel] ... has not designated the Hotel Employees, Restaurant Employees Union, Local 57 as their [sic] exclusive collective bargaining representative." (App.67.) Citing the Neutrality Agreement, HERE sought to arbitrate the outcome of the card count and requested a second card count in June of 2002, but Sage refused to comply with the request, claiming that the Neutrality Agreement was void.

On September 20, 2002, HERE filed a complaint in the District Court seeking to compel Sage to arbitrate issues arising pursuant to the Neutrality Agreement. Sage defended by arguing that the Neutrality Agreement was illegal and void ab initio.

In May 2003, both parties filed motions for summary judgment. In a memorandum issued on September 30, 2003, the District Court rendered a decision in favor of HERE and directed the parties to submit their dispute to arbitration pursuant to the Neutrality Agreement. The District Court held that (1) both parties were within their rights to reach a private agreement to provide an alternative method of deciding union representation and that such chosen method, i.e., card check procedures, was not illegal under federal law; (2) the Agreement's provisions for card check procedures did not constitute payment of "things of value" prohibited by section 302 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186; and (3) economic duress could not be used as a reason to invalidate the Agreement. The District Court ordered the parties to submit their dispute to arbitration pursuant to the Agreement.

We are presented with a final order of a District Court to review. Accordingly, we have appellate jurisdiction. 28 U.S.C. § 1291. Our review of a District Court's grant of summary judgment is plenary. See Fed. Home Loan Mortgage Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 443 (3d Cir.2003). We assess the record using the same summary judgment standard that guides district courts. See Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir.2000). To prevail on a motion for summary judgment, the moving party must demonstrate "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

II

In this appeal, Sage claims that (1) the Agreement HERE seeks to enforce is void ab initio, or voidable at its option, as having been secured in violation of federal law, specifically the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151 et seq.; (2) the terms of the Agreement require Sage to provide "things of value" to HERE in violation of section 302 of the LMRA; and (3) the Agreement is void ab initio because Pennsylvania's Home Rule Charter statute, 53 Pa. Cons.Stat. § 2962(f), prohibited the City from imposing the requirements set out in its ordinances and resolutions.

A

Sage's first argument is that the Neutrality Agreement signed with HERE is unenforceable, as a matter of law, because it intrudes into a field governed by federal labor law. Specifically, Sage argues that Ordinance 22 is preempted by section 7 of the NLRA.

The District Court declined to address the federal preemption question, holding that "[b]ecause the legality of the City's actions is not dispositive in this case and because the City is not, itself, a party to this action, we need not decide this issue." Hotel Employees & Rest. Employees Union, Local 57 v. Sage Hospitality Res., L.L.C., 299 F.Supp.2d 461,...